Pakistan stocks got a hammering on Thursday with the benchmark KSE-100 index losing over 2,100 points or nearly 4.7% during the trading session as the market reacted sharply to the widening trade deficit data and expectations of a hike in interest rate in coming months.

This is the worst single-day fall for the PSX's benchmark index since the pandemic-driven sell-off witnessed in March 2020. It is also the biggest decrease for the KSE-100 this calendar year, and surpasses the fall on March 29, 2021 when the index fell nearly 2.4%.

Just a day ago, the KSE-100 saw an increase of nearly 300 points.

Optimism returns at bourse, KSE-100 up 297 points

However, at noon on Thursday, the index was hovering around the 43,900-point level – a fall of 3.2% – and heading for one of its worst days of the calendar year. It lost further ground in the next hour, falling to the 43,500-point level before hitting 43,100 near the end of the session.

The sell-off comes after Pakistan posted a massive trade deficit in November, denting economic sentiment. The auction result of Pakistan Market Treasury Bills' (MTBs) also revealed weighted average yield of over 11% for six-, and over 10.3% for three-month papers. Additionally, a global sell-off amid fears of the Omicron variant took additional toll, but Pakistan's market was mainly affected by a higher-than-expected trade deficit and T-bill auctions.

Following the developments, investors resorted to a dump-and-sell approach with shares falling across-the-board. Foreign Investors Portfolio Investment's (FIPI) position, however, revealed a net buy of $0.74 million.

At close on Thursday, the KSE-100 Index ended with a fall of 2,134.99 points or 4.71% to finish at 43,234.15.

Inflation reading that touched a 21-month high in November also contributed to the negative sentiment.

This also raised interest-rate hike expectations, multiple analysts told Business Recorder, who added that this could put the central bank on the path of even more aggressive monetary tightening.

"The exceptionally high import bill is a massive concern," said one analyst. "This has raised current account deficit expectations, and is bound to put more pressure on the rupee."

The rupee also fell in the inter-bank market in tandem with the bloodbath at the stock market, hitting a record low to surpass the all-time weakest level it hit just a few days ago.

Against USD: Pakistan's rupee drops to historic low as trade gap widens

The PSX saw all-share volume of around 250 million shares by 1:00pm, with index-heavy cement, construction, and auto sectors bearing the brunt of the sell-off.

By the last hour, volume rose to nearly 386.75 million shares trading hands on the all-share index, up from 241.07 million a day ago.

WorldCall Telecom was the volume leader with 33.02 million shares, followed by Dolmen City (29.58 million), and Byco Petroleum at 22.83 million shares, revealed PSX data.